Inflation now seems to be approaching a peak across the region. Commodity prices have fallen, supply constraints have eased, pipeline price pressures have softened and firms’ selling price expectations have declined across CEE. CPI inflation has already fallen sharply in Russia and is now increasing at a much slower pace in Turkey. In Poland and Czechia, core price pressures have slowed noticeably and it is only really in Hungary where core inflation appears to have accelerated in recent months. The wildcard is what happens with electricity and gas prices this winter. For our part, we think that high energy prices will push inflation up further in the coming months but that it will then begin to fall back. Hungary and Israel are the only two major economies where we think large rate hikes still lie in store.
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